About 1.2 million foreclosure filings were reported last
year in 2006, 42 percent more than in the year 2005. Many
more are projected for this year of 2007. Current home
owner defaults and late payments are not just causing
problems in the mortgage industry but the situation is also
raising the question if the U.S. economy will suffer from
this subprime market squeeze.
What is the subprime squeeze about? Subprime loans are
given to borrowers who have poor credit. Foreclosure rates
on subprime loans more than doubled in 2005, however it's
important to remember that the subprime market is
fragmented. Homeownership has grown from 65 percent to 69
percent in the last ten years, and of those, half came from
subprime lending. (Source: Federal Reserve Bank of Chicago.)
Companies specializing in subprime mortgages are the ones
that are currently suffering, along with the financial
institutions that lent money to them. That's why many
people are concerned that the subprime squeeze will lead to
more credit restrictions on borrowers, which could hurt
consumer spending. There are experts who believe that
there's a big market segment of the population still out
there who are actively seeking financing for new homes, and
new technology companies have come up with new ways to help
provide loans to these folks via a unique mortgage payment
calculator that is so advanced that borrowers know
immediately if they have the possibility of financing a
purchase.
Many borrowers took out what amounted to uncollateralized
personal loans to get into a home they couldn't afford. Now
they are crying because they are loosing their homes. In
many cases it happened because unscrupulous loan officers
put many people into loans they shouldn't have been in.
Greed up and down the line from investors to borrowers
dominated this run up and it is fitting that all of the
players are feeling their part of the pain.
"If you are stuck in the subprime squeeze crisis, ask
yourself if you can pay your bills over the next 18 months,
then tough it out. If not, sell your house now before your
credit is ruined," said Eric Lesin, known as the Loan
Warrior. "Unskilled and unscrupulous brokers are at the
root of much of this, but borrowers are at fault too. Many
people placed bets that they could get in with little or no
equity and they fudged their applications."
Now, the fundamental direction of the market is towards
more traditional rules for loan approval. This return to
traditional standards coupled with the robustness of the
rest of the economy will help borrowers with savings and
sufficient income to quickly absorb the formerly overpriced
houses coming to us through foreclosure of former owners or
renters.
The future holds new technology tools that offer complete
disclosure which is certain to protect all parties - from
brokers, to banks to consumers ... even real estate agents,
who will profit by earning the commissions that brokers
typically get.
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Dogtor Paco, Inc. (http://www.dogtorpaco.com ) is a
proprietary patent-pending online lending services engine
where loan officers, mortgage brokers and real estate
agents can facilitate the approval and processing of loans
for customers faster. Dogtor Paco's powerful on-demand
mortgage calculator provides good faith estimate (GFE)
level quotes with full disclosure including monthly
payments and all closing costs, using instantaneous rates
to calculate closing costs and monthly payments for a
particular property.
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